Bringing Good Things to GE

By Thomas B. EdsallApril 13, 1985

In the public mind, the name General Electric probably conjures up light bulbs and dishwashers: They're the ones who "bring good things to life." In Washington these days, GE is known as the first major defense contractor ever to be indicted on charges of defrauding the Pentagon.

But according to many politicians and lobbyists, General Electric deserves to be much better known as one of the toughest and most successful players in Washington's bureaucratic and political arenas. This is a company whose huge but rarely visible Washington office is masterful at bringing good things to life -- for General Electric.

Many of GE's biggest Washington victories escape public notice. A good example is GESSAR-II, GE's clever insurance for the day -- if it ever comes -- when the nuclear power industry emerges from the dark age it entered after the Three Mile Island disaster and publicity about huge cost overruns.

Atomic engineers and scientists at General Electric have retreated into a corporate monastery where, like the "monks who kept knowledge alive while ignorance howled in the streets outside," they continue research and development, according to Louis Tomasetti, executive vice president for power systems at General Electric.

But General Electric's political and governmental operation has not hidden itself behind cloistered walls. It has quietly won approval from the Nuclear Regulatory Commission for a standardized nuclear plant design -- the first one approved by the NRC. Such a design could cut two to four years out of the regulatory-licensing process, making investment in nuclear power extremely attractive to electric utilities that now shy away from nuclear energy in part because the approval process takes so long and costs so much.

GE won approval for its design -- which also could help boost its foreign sales -- with painstaking and patient work. The process took 46 months, required 21,000 pages of documentation and resulted in an 18,000-page report describing the plant design and specifications, a typical project for General Electric's Washington office.

With a staff of 120 housed in Pennsylvania Avenue offices that cost $1.3 million a year to rent, GE's Washington headquarters has established corporate beachheads in almost every branch of the government. Using a small army of corporate specialists, the office is designed to mesh a private sector conglomerate with the public sector conglomerate -- the U.S. government.

The goal is to manipulate the Washington market much as one would manipulate a consumer market. Consider:

* For General Electric, the key customers no longer are the couple shopping for toasters in the suburban shopping mall. They are the secretaries of the Navy and Air Force shopping for jet engines for the F14, the F15, the F16, the B1, and the Stealth bomber, and choosing between Pratt & Whitney and General Electric. GE's fighter engine has proved so successful that the Navy has ordered the company to give a copy to its major competitor to guarantee that there will be at least two production sources.

* The Reagan administration's increases in defense spending have boosted defense contracts for General Electric, a firm consistently among the nation's top five defense contractors, from $2.95 billion to $4.55 billion from fiscal year 1981 to 1984.

* Key decisions within the Medicare administration will determine the bottom line for GE's growing involvement in high-tech medicine, particularly devices known as magnetic resonance imaging (MRI) units, a technological giant step ahead of CAT scanners.

* The federal tax code can generate more money for GE's bottom line than many of the firm's commercial or industrial activities. A masterful ability to influence the writing of tax laws and to capitalize on its provisions produced $283 million in tax refunds from 1981 through 1983, when the company's net earnings were $5.49 billion.

* One of GE's central legislative battles during the past four years has been to protect the Export-Import Bank from Reagan administration proposals to kill it or cut back its subsidies. The bank has provided foreign buyers of GE's products with low-interest loans, guarantees and insurance protection totaling $266.8 million in the three most recent fiscal years for which data is available.

* The U.S. Synthetic Fuels Corp. has become the source of $120 million in loan guarantees for the Cool Water Coal Gasification project, in which GE is a major investor. The Synfuels Corp. is the prospective source of $100 million in subsidies for the Hop Kern heavy oil project in California, which is fully owned by Ladd Petroleum, a GE subsidiary.

* A pending nuclear cooperation agreement with the People's Republic of China, still under negotiation, is a key to opening a major new market for GE's boiling-water nuclear plants. China already has proved an important customer, buying 220 GE locomotives.

* The federal government is the buyer not just of jet engines, but of a host of GE products. Sales run the gamut from toilets on satellites to $400 million "over the horizon" radar systems; from rapid-firing guns on the A10 antitank aircraft to light bulbs in the bureaucracies lining Pennsylvania Avenue. The Lobbying Arm

To back the influence of a corporation with the largest national presence of any company in the country -- GE has 228 plants in 34 states and Puerto Rico, and domestic employment of 241,000 -- the company retains a host of Washington wheeler-dealers, intelligence gatherers, former congressmen and executive branch employes.

Those who have represented GE in the recent past include J.D. Williams, a premier Washington lobbyist who maintains a Capitol Hill townhouse in part to hold fund-raisers; Marcus A. Rowden, former chairman of the Nuclear Regulatory Commission and general counsel to the Atomic Energy Commission; former representative James C. Corman (D-Calif.), who served on the House Ways and Means Committee and chaired the Democratic Congressional Campaign Committee; former representative Richard C. White (D-Tex.), who served on the Armed Services and Science and Technology Committees; and a partnership of three former Air Force generals -- Thomas P. Stafford, Kelly H. Burke and Guy L. Hecker, who specialize in the Pentagon's weapons procurement process.

In addition, the firm has broken its Washington staff into separate units to lobby on aircraft engines; aerospace radar, electronics, flight simulators and weapons systems; nuclear power plants; the Export-Import Bank; and the regulation of CAT scanners and magnetic resonance imaging scanners. There is, further, a separate lobbying unit with a mandate to represent GE on companywide issues of taxes, labor law, environmental legislation and trade.

One member of this special "generic" unit, Peter Holmes, specializes in Republicans, particularly those on the Ways and Means Committee; another, Robert Barrie, specializes in Democrats, particularly members of the House leadership; and a third, Phillips S. Peter, is GE's negotiator with major downtown business lobbies.

General Electric refused to permit interviews of its Washington lobbyists by The Washington Post for this series. Even General Electric's public relations officials, who did provide factual material on company products, pointedly requested that their names not be used.

General Electric nurtures a reputation for bipartisanship. But its Washington office includes one extremely effective hard-core Democrat, Barrie, who uses his office at GE to practice one of the most useful of Washington endeavors -- fund raising for his friends.

Barrie served from 1954 to 1957 as legislative assistant to Harrison (Pete) Williams, first a House member and then senator from New Jersey, and as executive director of Hubert H. Humphrey's 1960 presidential campaign. Most recently, Barrie was on Walter F. Mondale's national finance council, a position reserved for those who raised a minimum of $25,000.

"Bob Barrie is a good Democrat," said Kirk O'Donnell, chief counsel to House Speaker Thomas P. (Tip) O'Neill Jr. (D-Mass.), succinctly describing Barrie in gut political terms. Barrie is a member of the Democratic Congressional Campaign Committee Speaker's Club and the Democratic National Committee's Business Council, both of which require a PAC contribution of $15,000.

Barrie's willingness to make endless calls to fellow lobbyists to ask for cash for candidates and to attend almost nightly fund-raisers has paid off in a major way for General Electric.

During final conference committee consideration of the 1982 tax bill, for example, "Barrie was able to set up a key meeting with House Speaker Tip O'Neill to explain the corporate tax-leasing provisions," according to an allied lobbyist who watched Barrie in action. "When that thing was coming down to real short strokes, Barrie was able to get with Ways and Means Committee Chairman Dan Rostenkowski (D-Ill.), with the speaker, with the entire Democratic leadership to explain what was a horribly complex issue.

"And he got them on board. From GE's point of view, it was quite a coup. It was at the key moment when the decisions had to be made and he was able to get these people focused. They could have killed the entire leasing industry."

A more subtle role in the lobbying process is played by Peter, the vice president for corporate-government relations. Peter has steadily worked his way up the corporate ladder since joining GE in 1963, and now appears to spend more time downtown than on Capitol Hill, with much of his attention evidently focused on working with other business organizations and ad hoc alliances.

One of Peter's key business alliances is the Carlton Group -- named for its regular breakfast meetings at the Sheraton Carlton Hotel -- which includes representatives of the Chamber of Commerce, the National Association of Manufacturers, the National Association of Wholesale-Distributors, the American Council for Capital Formation, and the lobbying firm run by Charls E. Walker.

The Carlton Group wrote the initial version of the business provisions of the 1981 tax cut enacted in the first year of the Reagan administration, provisions that were extremely lucrative for the group's members. In 1980, GE paid $330 million in federal taxes; in 1981, the first year the Carlton Group's tax cut went into effect, GE received a net tax refund of $90 million.

GE has had great success from other corporate alliances as well. In 1981, for example, the Reagan administration initially included in its proposed package of budget cuts a sharp reduction of funding for the Export-Import Bank. The Chamber of Commerce, a strong ally of President Reagan's, endorsed the cuts; General Electric, however, did not.

"There were only about three or four companies that saw the implications for the export side," said Willard Berry, director of the subsequently formed Coalition for Employment through Exports (CEE). "There were a handful of companies that realized that it was going to be really bad news if the bank were dismantled, and GE was one of the few . . . . " The major members were Westinghouse, General Electric, Boeing and McDonnell Douglas.

From 1982 through 1984, those four companies benefited from Ex-Im Bank loans and other forms of guarantees and insurance to their foreign customers that totaled $3.085 billion.

The export coalition is just one thread in a fabric of GE alliances. The firm would not volunteer a list of organizations it has joined, but it can be determined from other sources that it belongs to two dozen industry groups, from the Business Roundtable to the Health Industries Manufacturers Association and the U.S. Committee for Energy Awareness.

"They GE are almost unique in making sure they have a finger in every pie," said one source who has worked with General Electric on numerous issues.

At the same time, GE never confuses its own interests with anyone else's. Richard Rahn, chief economist at the Chamber of Commerce who has worked with GE at the Chamber and at the Carlton Group, observed: "I'm not sure I ever knew where GE was. Phil Peter, the corporate vice president is the type of fellow who doesn't say much, he keeps things close to the vest. He knows what I'm thinking; I've got the type of job where you've got to tell all. They work very quietly. I was never really sure what they were doing." High-Tech Medicine

GE is in the midst of delicate negotiations with the federal government on the extent to which Medicare will cover the cost of a highly expensive new diagnostic tool, magnetic resonance imaging (MRI) systems.

GE is one of at least 16 manufacturers of these $2 million units, which produce internal body images through radiowaves and magnetic fields instead of through the more dangerous X-rays of CAT scanners. They permit examination of such bone-surrounded areas as the spinal chord and brain stem, and offer the possibility of detecting diseases by detecting chemical changes in cells.

The future profitability of this technology, however, will depend in part on the extent to which Medicare covers the cost. For the moment, this decision is caught in a complex network of bureaucracies, including the Health Care Financing Administration, the Office of Technology Assessment and an independent board called the Prospective Payment Assessment Commission.

General Electric has carefully positioned itself to protect its interests. The firm is a member of the two key lobbying associations representing MRI producers. The 18-member board of directors of the National Electrical Manufacturers Association includes two GE officials, Orlin P. Yenerich and Francis W. Schilling; and Walter F. Robb, senior vice president in charge of GE's Medical Systems Group, serves on the board of the Health Industries Manufacturers Association.

More important, Robert M. Moliter, GE's chief medical systems lobbyist, has been appointed to the Office of Technology Assessment's advisory panel for federal policies and the medical devices industry. The Jet Engine War

Perhaps GE's most profitable victory in Washington was its vanquishing of Pratt & Whitney in the most significant weapons procurement battle in decades.

Early in the 1970s, General Electric officials began to hear a growing chorus of complaints from the line Air Force and Navy officers using F14 and F16 planes equipped, respectively, with Pratt & Whitney's TF30 and F100 engines.

The engines, military officials complained, were flaming out, exploding and failing to meet standards. But according to industry and Pentagon officials, Pratt & Whitney refused to take the problems seriously, a charge Pratt & Whitney officials have denied.

GE turned to its key aircraft engine lobbyists, Harry Levine and George Troutman, who now is vice president in Bell Helicopter Textron's Washington office, to explore the potential for selling GE alternatives to the Pratt engine.

GE subtly avoided any suggestion that previous Pentagon procurement of the Pratt & Whitney engines had been a mistake. Instead it adopted a strategy that placed the Navy and Air Force officials who procured those engines in the best possible light.

"The military hates to admit mistakes," a GE strategist said on condition that he not be quoted by name, "Something had to be done in such a way that the military would not be blamed for the difficulties directly. They will accept guilt only if they can explain it in ways that are not going to come back and bite them . . . . What we did was to make it into the military being victimized by these terrible people, the contractors . . . .

"We got the Congress to put words in the authorization and appropriation bills in 1977 directing the military to start looking at this. The military didn't. The military was able to just ignore it in '77. But we got it done again in '78.

"We got questions to be asked of witnesses, the military witnesses, by different congressmen and senators. What about this, what about that? And then we would get words put into the congressional reports viewing with alarm these problems with the Pratt & Whitney engines .

"Then with all of that pressure over two years building up . . . at the very last minute in '78, we got the military to put $34.5 million in the FY '79 budget request to do a demonstration of General Electric's F101X engine.

"Pratt & Whitney didn't see much happening; they were just sitting there, still kind of fat and happy. After that got in the budget, Pratt & Whitney didn't know it was there.

"It wasn't a tough battle, just tedious, educating more and more people. It was a battle not of toughness, but of tenacity and perception."